Professional Documents
Culture Documents
Insurance 1: Basics
Objectives
A. Understand what our leaders have said regarding insurance B. Understand the importance of insurance C. Understand the key principles of insurance
Insurance (continued)
President N. Eldon Tanner further commented:
With rising medical costs, health insurance is the only way most families can meet serious accident, illness, or maternity costs, particularly those for premature births. Life insurance provides income continuation when the provider prematurely dies. Every family should make provision for proper health and life insurance. (N. Eldon Tanner, Constancy Amid Change, Ensign, Nov. 1979, 80.)
Insurance (continued)
What is the purpose of insurance?
The purpose of insurance is to transfer the risk of certain types of losses or events from yourself to another institution. By transferring risk, it can help you and those you love achieve your specific goals if you die, get sick or become unable to work Specific goals may include: To take care of your spouse and children To raise children without working outside the home To be able to go to college and on missions
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Insurance (continued)
What happens without Insurance (life, health, disability, or liability insurance)?
If you live: Nothing changes If you die, get sick, or get sued without insurance: Your spouse may have to work Your children may not achieve important goals You may not be able to take care of your family You may be unable to work and lose your earning capacity You may lose everything you have ever saved
Insurance (continued)
How do you eliminate risk?
Avoid it. You can take care of yourself, avoid high risk occupations, eat well, and exercise. Reduce it. You can reduce some risks by adding fire extinguishers and burglar alarms, adding airbags, or getting regular medical checkups Assume it. You can retain the risk through selfinsurance. If the costs are not too high, you can assume some risks yourself Transfer it. You can transfer the risk to others by purchasing insurance. You are paying premiums to transfer the risk to an insurance company.
Insurance (continued)
Should you insure against all losses?
No. Some losses are not as critical as others. Insure against the critical or serious losses Can you classify your risks? Yes. I like two thoughts: Frequency of loss How often does the loss happen? Severity of loss How severe are the results if the loss happens?
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Insurance (continued)
Frequency of Loss Low High
Avoid
Severity of Loss
High
Low
Insurance (continued)
What is the key to insurance?
Balance the cost of reducing risk with the severity of the potential loss Insure against high severity losses that rarely occurthose that could have a major impact on your financial situation Reduce and avoid those other risks that you can Self-insure against the smaller risks Use insurance for what insurance does best! Be careful in mixing insurance and investing products
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Age
60
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Investments
Term
Permanent
Total Protection
Cash value: with guaranteed insurability option paid up till age 65. Term: Five-year guaranteed renewable term in $50,000 and $100,000 increments; can add and drop as necessary. Investment: Includes individual and employer sponsored retirement plans
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Insurance (continued)
Any questions on insurance?
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Questions
Any questions on the key principles of insurance?
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Review of Objectives
A. Do you understand what our leaders have said regarding insurance? B. Do you understand insurance? C. Do you understand the principles of insurance?
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6. Would you be willing to inform me of the commission youll receive on any policies that you recommend?
You want to make sure that the agent is working on your behalf. By knowing the agents commission on various policies, you may be able to avoid policies that are more of a benefit to the agent than to you. Beware the agency problem!
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